Andrews says he will support student loan compromise

David Levinsky @davidlevinsky

Monday

Jul 29, 2013 at 12:01 AMJul 29, 2013 at 5:45 AM

Congressman Rob Andrews says the bipartisan student loan bill passed by the Senate last week isn’t perfect, but he still plans to vote for it this week when the House of Representatives is expected to take it up, claiming it will save students from a large interest-rate hike that went into effect this summer.

“I don’t think it’s a perfect compromise, but I’ll support it, principally because students who would have had to pay 6.8 percent interest will now pay 3.8 percent,” Andrews, D-1st of Haddon Heights, said Thursday.

The Senate bill, which cleared that chamber Wednesday with an 81-18 vote, would link interest rates on federal student loans to the 10-year Treasury rate, providing lower rates right away but higher ones later if the economy improves, as expected.

The House is expected to vote on the bill this week through a “suspension of the rules” procedure, which would require a two-thirds majority to pass. Andrews said he expects the measure will still pass and be signed quickly by President Barack Obama before students start signing loan documents for fall terms.

If the bill becomes law, undergraduates this fall would borrow at a 3.8 percent interest rate. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. The rates would be locked in for that year’s loans, but new loans could be more expensive each year as rates rise as the economy improves and the expense for government borrowing increases.

The rates would be capped at 8.25 percent for undergraduates, 9.5 percent for graduate students, and 10.5 percent for parents.

The measure is similar to one already approved by the Republican-controlled House, which also tied loans to the Treasury rate. The major difference is that the House bill adjusted all loan rates each year rather than the compromise measure, which fixes each year’s loan at that year’s rate, Andrews said.

“This bill you still get a fixed rate,” said Andrews, who voted against the original House measure. “It’s a difference, and I think it’s an important one.”

What was most important, he said, was that the bill would largely reverse this summer’s interest rate increase for new Stafford subsidized loans, which doubled from 3.4 percent to 6.8 percent on July 1 because Congress could not agree on a fix to keep them at 3.4 percent.

Rates for subsidized loans will still rise slightly this fall under the compromise measure, but Andrews described it as a more reasonable one compared with keeping them at 6.8 percent.

About 145,000 New Jersey loan holders have been impacted by the change.

Not everyone is enamored with the compromise, notably liberal Democrats, who have labeled it a “bait-and-switch” measure that would lure new borrowers with low rates now but cost future students. Most Democrats, including Andrews, had pushed for fixing subsidized rates at 3.4 percent for the next two years.

The New Jersey Public Interest Research Group, a nonprofit advocacy group, cautioned that students will likely pay more than the 6.8 percent rate as early as two years from now if the economy improves, as expected. The group claims the change will create revenue for the federal government.

“The bottom line is that students will pay more under this bill than if Congress did nothing, and low rates will soon give way to rates that are even higher than the 6.8 percent rate that Congress is trying to avoid,” said Jen Coleman, an advocate with NJPIRG.

Loren Whitaker, a Stafford loan holder who will be a junior at Rutgers University in Newark this fall, was also critical of the compromise, claiming it would make the problem of student debt even worse in the long run.

“This is a bad deal for students, because it will make the problem of student debt even worse,” he said.

Andrews disagreed, arguing that students are protected by both the interest-rate caps as well as the federal government’s income-based repayment program, which establishes a maximum monthly loan repayment at 10 percent of discretionary income.

Under that program, loan holders who work in public service professions can qualify to have unpaid debt forgiven after 10 years, and all others can get remaining debt forgiven after 20 years.

Andrews said that program helps keep higher education available and affordable, even with the interest-rate increases.

“I don’t like the fact that there will be slightly higher rates, but I’m very happy students will be paying 3.8 percent instead of paying 6.8,” he said.

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